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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Sun Corporation issues 500 shares of $8 par common stock for a patent. The stock is currently selling for $37 per share on the open market, and no significant impact on the market price is expected by the issuance of the additional shares. Prepare the journal entry to record this transaction.

To determine

Prepare the journal entries to record the additional issue of common stock.

Explanation

Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Patent:  Patent is a right that is exclusively granted by the Government to an individual or firm to process or design, to make, use or sell its invention for a limited period. It protects the right of the inventor from doing so by any other individual till the granted period expires.

Prepare the journal entries to record the additional issue of common stock in exchange of patent:

Account title and ExplanationPost Ref.

Debit

($)

Credit

($)

Patent  ($37× </

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